Even if the current government gives up tax

Q: Even if the current government gives up tax reduction policies, such as tax cuts for the rich, it can create financial resources for the entire nation of 13 trillion won a year for the restoration of people's livelihoods

The Bank of Korea's "M2 (original currency volume)" released on April 16, 2024 was "3,937 trillion won (approximately US$2.82 trillion)."

The Bank of Korea's M2 has been on the rise for nine consecutive months, increasing by 0.1% month-on-month and by 3.4% year-on-year (see attached Bank of Korea data).

In other words, the Bank of Korea continues to print money.

So what is the reason?

It is because of the budget deficit.

Let's take an example.

On April 11, 2024, the current government released the "National Settlement Report for FY 2023".

According to the main contents, the current government's fiscal 2023 fiscal year was "87 trillion won deficit in the managed fiscal balance, which shows the actual fiscal condition."

In addition, "national debt (central and local government debt)" was "1,126.7 trillion won", and the national debt ratio was "50.4%" of GDP, exceeding the "50% range" for the first time.

However, the more important part is the data of the Ministry of Strategy and Finance (hereinafter referred to as the Ministry of Strategy and Finance).

According to the data from the Ministry of Economy and Finance, the fiscal deficit from May 10, 2022, when the Yoon Suk Yeol government was launched, to 2027 is predicted (Ministry of Data Planning and Finance).
So the national debt of the Republic of Korea in 2027 is "1,417.6 trillion won,"

In addition, it presents a policy that the national debt ratio continues to increase to "53.0%".

In other words, the government will continue to pay for the lack of tax revenue due to the current government's tax reduction policies, such as the tax reduction for the rich.

Then, let's look at how the current government's tax policies such as the reduction of the rich have affected the Korean economy.

According to the "Results of Closing Total Revenue and Total Expenditure for Fiscal Year 2023" released by the Ministry of Strategy and Finance on February 8, 2024, a "tax shortage (fiscal deficit)" of "56.4 trillion won" occurred, the largest ever.

National tax revenue for fiscal year 2023 was 344.1 trillion won, down 13.1 percent (W51.8 trillion) from "W395.9 trillion" in 2022.

Among them, the tax item that decreased the most is "corporate tax".

Corporate tax fell 22.4 percent (W23.2 trillion) from "W103.6 trillion" in 2022.

Next is "transfer income tax".

Capital gains tax in 2023 was "W17.6 trillion," down "W14.7 trillion (considering decimal points)," compared to "W32.2 trillion" in 2022.

Therefore, the tax revenue decreased in the corporate tax and capital gains tax items in fiscal year 2023 is "37.9 trillion won".

In addition, "56.4 trillion won" of tax revenue decreased in all items, including "value-added tax (-7.9 trillion won)" and "traffic energy environment tax (-300 billion won)."

In the end, this huge amount of tax revenue shortage can be seen as one of the reasons for the "tax policy failure" due to the "tax policy reduction policy for large corporations and the rich" and the so-called "rich tax reduction".

However, in almost all items, this tax reduction has occurred widely, and the only item that has increased is "earned income tax".

Earned income tax revenue in 2023 was "59.1 trillion won," up 1.7 trillion won (3.0 percent) from 2022.

In other words, other national tax revenues decreased, but the earned income tax increased.

Then, let's take a look at whether the current government's tax reduction policy for the rich is the right policy.

Let's take an example.

JANUARY 3, 2024 (Reuters) - Here's what "REUTERS" says.

“Rising federal deficits fueled by falling tax revenues and rising federal expenditures”,
In other words, "REUTERS" states that "the US federal government's fiscal deficit is increasing due to a decrease in tax revenue and an increase in federal spending."


In other words, the US government and the Republic of Korea's pork-barrel policies and wealth tax policies prove that only tax revenues, fiscal deficits, and the resulting national debt are increasing.

Let's take another example.

"A few years ago, the London School of Economics studied "trickle-down" policies for 50 years in 18 developed countries, including the United States, and found that the only result was "rather increasing the wealth of the already wealthy."

Here, "Trickle-down" means that in economic terms, the overflowing water, which can be called "the rise of wealth of large corporations or wealthy people," even wet the floor symbolizing small and medium-sized enterprises and the working class.

In the end, due to the current government's failed tax policy, that is, tax reduction for large corporations and rich people, and tax collection for wage earners and ordinary workers, wage earners and ordinary workers are the most difficult economic players in Korea.

In addition, the aftermath of the decrease in real income of wage earners and general earned income earners has a fatal impact on general small business owners.

In short, these economic actors are now living a difficult economic life.

That's why CEO Lee Jae-myung's emergency prescription was issued, "Payment of 250,000 won nationwide."

In other words, CEO Lee Jae-myung proposed to pay 250,000 won per person and an average of 1 million won per household in local currency to all citizens in order to resolve the economic emergency of the people's livelihood.

However, some politicians and economists are talking about "inflation."

He even denigrates CEO Lee Jae-myung as "an ignorant man."

However, "the definition of inflation" refers to "a phenomenon in which the amount of money expands, the value of money plunges, prices continue to rise (high prices), and the real income of the general public decreases."

In other words, it has nothing to do with inflation.

The basis for my argument is as follows.

According to the Bank of Korea's most recent data, the monetary base (M2) in February 2024 was "3,929.9 trillion won", and the local currency of 13 trillion won was "0.0033%" of the BOK's monetary base, so inflation was negligible, compared to, for example, the Bank of Korea's "0.1 percent" increase in M2 compared to January 2024.

This is also because the amount of 13 trillion won is a temporary increase in real income.

Rather, the 13 trillion won "People's Recovery Support Fund" has a positive effect on increasing household consumption in the current economic downturn, raising Korea's GDP.

In the end, even if the current government only gives up its tax cut policy, it will have the financial resources to give 13 trillion won to the entire nation four times a year.